Las Vegas Casinos Sputtering on Uneven Recovery

Any thought that the Las Vegas gaming market would recover quickly after the recession has long since been lost, but there is a slow and steady recovery taking place in Sin City. High-end operators Las Vegas Sands (NYSE: LVS  ) and Wynn Resorts (NASDAQ: WYNN  ) have been seeing improved results as wealthy customers return to the casinos, but the lower end of the market, where MGM Resorts (NYSE: MGM  ) and Caesars Entertainment (NASDAQ: CZR  ) play, has been choppy to say the least.

MGM's earnings last week gave a granular view of the Las Vegas recovery, and while the figures were choppy, it's still apparent that the high end of the market is still where there's money to be made.

Here's a look at revenue and EBITDA growth at Las Vegas resorts over the first nine months of the year. Caesars Entertainment doesn't break out individual, resorts so I've included its entire operations at the bottom.

Casino

Y/Y Revenue Growth

Y/Y EBITDA Growth

The Venetian and Palazzo 

2.9%

(11.3%)

Wynn Las Vegas 

7.7%

23.7%

Bellagio 

4.6%

24.7%

MGM Grand Las Vegas

12.2%

54.9%

Circus Circus

(4%)

(27.3%)

The Mirage

5.3%

(8.2%)

Caesars Resorts 

(0.7%)

7%

Source: Company earnings reports.

It's evident that the Bellagio and Wynn, the two top-end resorts on The Strip, are performing well. It also looks like low-end properties such as Circus Circus are struggling, a likely driver of Caesars' bad results. In the middle market, the results are mixed to say the least.

Investing in Las Vegas now
When looking at Las Vegas-centric stocks, it really comes down to what else you want to invest in. Las Vegas Sands and Wynn are really Macau companies with a sprinkling of Las Vegas in their results. MGM Resorts is still Las Vegas-centric, but once its Cotai resort opens, it's likely that more than half of its EBITDA will come from Macau. On the flip side, Caesars Entrainment gets well over half of its revenue from regional gaming, which has really struggled over the past five years.

I think investors looking for significant exposure to Las Vegas should stick to MGM Resorts. It has improving operations, with revenue up 6.2% in the first nine months of the year and EBITDA up 17.3% over the same time. The company also has upside in Macau when it opens a Cotai resort. That's a much better bet than wagering on Caesars and a recovery in regional gaming.

Wynn Resorts and Las Vegas Sands are great bets, but even a strong recovery in Las Vegas won't move the needle much for them. Las Vegas is still an MGM town.

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